Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Edenred. We currently have 8 research reports from 1 professional analysts.
The company posted robust Q4 results, led by a strong performance in Europe, where accelerated digitalisation and the promising macro-economic situation were the key drivers. Brazil remained a mix bag as the favourable Fleet & Mobility segment was offset by the subdued Employee Benefit business. Our optimism on the company remains intact and is fuelled by management’s aggressive adoption of technology and vast untapped opportunities in Fleet & Mobility segment. We will revise our estimate upward; no change in the stock recommendation.
Edenred published Q3 FY17 trading results below our estimates as well as market consensus. All growth numbers are on a lfl basis, unless specified otherwise. Operating revenue grew by 7.0% (vs Q2: 7.2% and Q1: 10.0%), which was 300bp below our estimate. Employee benefits (64% of group sales) came in at 3.7% during the quarter (vs Q2: 5.6%, Q1: 6.7% and FY16: 7.6%), largely due to the high unemployment rate in Brazil and challenging conditions in Venezuela (ongoing economic and political crises). Excluding the Venezuelan operations (1% to the company’s consolidated revenues and EBIT), the employee benefits business grew by 4.9% during the quarter. Fleet & Mobility Solutions (26% of group sales) continued to post robust growth (Q3: 17.8%, Q2: 15.9%, Q1: 27.1% and FY16: 13.1%) across all major operating regions. On a reported basis, the segment grew by a staggering 78.8% ytd, benefiting from Embratec and UTA consolidation in May 2016 and January 2017, respectively. Complementary solutions (10% of group sales) clocked 7.5% revenue growth during the quarter. Total reported revenue (operating + financial) increased by 11.5% in Q3 – lfl: 6.6%, scope impact: 6.6% (mainly from the UTA acquisition) and currency impact of -1.7%. Management has reaffirmed full-year guidance – lfl growth in operating revenue: >7%, operating EBIT: >9%, FFO: >10% and full year 2017 EBIT: €420m – €445m.
Edenred released a Q1 17 trading update with numbers ahead of our estimates as well as the market consensus. Please note, the company has stopped sharing issue volume details from 2017 onwards. The operating revenue increased by 10% on a lfl basis (vs Q4 16: 10.0%, Q3 16: 9.9%; our estimate: 8.6%), largely driven by strong growth in both employee benefits (6.7% yoy; c.65% of group revenue) and the expense management business (27.1% yoy; c.25% of group revenue). In employee benefits, all geographies contributed to the growth momentum except for Brazil, which declined by c.5% due to tough macro-economic conditions (further rise in the unemployment rate). The expense management business clocked solid gains, especially in Hispanic Latin America (led by Mexico and Argentina) and to a lesser extent in Brazil. Financial revenue increased by 3.1% on a lfl basis as the 9.9% decline in Europe was more than offset by the 14.8% growth in Latin America. On a reported basis, total revenue (operating plus financial) was up 29.6%, on the back of a positive scope impact (16.6%; related to the consolidation of Embratec in Brazil and UTA in Germany) and FX tailwinds (3.4%, largely due to 28.7% appreciation in the Brazilian real vs the euro). The company stepped up the shift to a digital platform (as part of its turnaround plan named Fast Forward) by acquiring the assets of Moneo Resto in France (a fully digital meal voucher provider with a client base of 65,000 users). Edenred also issued bonds worth €500m (1.875% coupon and a 10-year expiry), reducing the average cost of debt to 2.1% (vs 2.6% in FY16). Management has reaffirmed full-year guidance – lfl growth in operating revenue: >7%, operating EBIT: >9% and FFO: >10%.
Edenred reported 9M FY16 results (ending 30 September) broadly in line with our estimates. The lfl revenue increased by +7% (Q3: +9.1%, Q2: +6.9%, Q1: +5.2%; our estimate: +4.5%), despite clocking a 1.9% decline in financial revenue (13.3% decline in Europe, partially offset by +7.3% growth in Latin America). Total reported revenue came in at €804m (+2.8% vs our estimate of +2.9%), on account of currency headwinds (-8.4% yoy; largely due to the depreciation of the Brazilian real and Mexican peso vs the euro), and partially offset by a 4.2% positive scope impact (primarily related to Embratec’s integration in Brazil). The take-up rate was unchanged yoy at 4.6%. Issue Volume (IV) increased by +8.9% on a lfl basis (Q3: +10.2%, Q2: +9.3%, Q1: +7.4%; our estimate: +7.2%), reflecting strong growth across all major regions. Europe was up 7.7% (Q3: +6.4%, Q2: +9.7%, Q1: +6.9%; accounts for c.48% of the group’s IV), once again driven by Central Europe (+8.5%; reflecting improving economic conditions) and France (+4.6%; due to solid gains in Ticket Restaurant solutions). Despite challenging macro-economic conditions, the LatAm region reported a strong sequential improvement (Q3: +14.3%, Q2: +8.7%, Q1: +7.5%; accounts for c.48% of the group’s IV), propelled by Hispanic LatAm (+18.4% yoy; employee benefit solution growth of 24.3%). Also, Brazil was up 4.5% on the back of strong growth in the expense management business (+15.7% yoy). Management has reiterated its FY16 guidance: IV organic growth of 8-14% (we go for the lower end of the range), EBIT to range €350-370m (vs our estimate of €351m), operating flow-through ratio to remain above 50% and FFO to grow by over 10% organically. Furthermore, a promising three-year plan (called Fast Forward) was announced at the investors’ day. The company aims to accelerate organic revenue and EBIT growth to over 7% and 9%, respectively, by adopting the following measures: 1. Acquire a controlling interest in UTA by exercising the call option to purchase an additional 17% stake (thus bringing the total to 51%). The move will increase the expense management business’s contribution to the group’s IV from 17% to 30% post consolidation. 2. Achieve double-digit organic revenue growth in expense management and mid single-digit in the employee benefits business through various initiatives. 3. Expansion in the corporate payments ecosystem (manage financial transaction flows among various companies across geographies). This encompasses the use of virtual card technology and establishing a private payment network by leveraging its authorisation platform, PrePay Solutions (70% owned JV with Mastercard). 4. Slashing the dividend pay-out ratio to at least 80% (currently >90% of recurring profit after tax) in order to augment the investment in the corporate payments business.
Edenred reported H1 FY16 results broadly in line with our estimates. The lfl revenue increased by +6.1% (Q2 16: +6.9%, Q1 16: +5.2%; our estimate: +4.7%), despite clocking a 1.6% decline in financial revenue (15.4% decline in Europe, partially offset by +9.8% growth in Latin America). However, the reported revenue was down 2.4% (vs our estimate: +3%) to €526m, on account of currency headwinds (-10.8% yoy; largely due to the depreciation of Brazilian real and Mexican peso vs the euro), and partially offset by a +2.3% scope effect. The take-up rate declined to 4.6% during the period (-10bp yoy). Issue Volume (IV) grew by +8.4% on a lfl basis (Q2 16: +9.3%, Q1 16: +7.4%), largely driven by a sequential improvement in the European region (Q2 16: +9.7%, Q1 16: +6.9%, Q4 16: +5.4%; c.50% of total IV). Within the region, “Europe – excluding France” led the momentum (+9.9% yoy; reflecting favourable economic dynamics in Central Europe and a positive calendar effect), followed by an improved performance in France (+5.2%; driven by the Ticket Restaurant business). Despite challenging macro-economic conditions, the LatAm region clocked +8.1% growth (Q2 16: +8.7%, Q1 16: +7.5%; our estimate: +7.5%; accounts for c.45% of total IV), primarily driven by the Hispanic LatAm business (+13.8%; led by +19.1% growth in employee benefit solutions). Also, Brazil was up 4.5% on the back of strong growth in the expense management business (+16.8% yoy). The company issued a €250m Schuldschein loan (fixed + floating rate; average financing cost of 1.2% and maturity of 6.1 years) and signed an agreement in July to extend the €700m undrawn revolving credit facility by two years to July 2021. Management has reconfirmed its FY16 guidance: IV organic growth of 8-14% (lower end of the range), EBIT to range €350-370m (vs our estimate of €351m), operating flow-through ratio to remain above 50% and FFO to grow by over 10% organically.
Edenred reported Q1 16 results below our estimates. The total revenue increased by 5.2% on a lfl basis (vs Q4 15: +5.4% and Q3 15: +4.9%), despite clocking a 3.1% decrease in the financial revenue. However, the reported revenue was down 5.2% (vs Q4 15: -2.5%, Q3 15: -4.3% and our estimate: +2.4%) on account of currency headwinds (-12.3% yoy; mainly due to the Brazilian real and Mexican peso), and partly offset by the scope effect (+1.9%; integration of ProwebCE business in France). The take-up rate declined to 4.6% in the quarter (vs 4.7% in Q1 15). On Issue Volume (IV), Edenred posted growth of 7.4% on a lfl basis (vs Q4 15: +8.4% and Q3 15: +7.0%), on the back of better growth in Europe (Q1: +6.9% vs Q4 15: +5.4% and Q3 15: +4.1%), with France (+4.2% vs Q4 15: 3.9% and Q3 15: +3.3%) leading the momentum, driven by the Ticket Restaurant business. However, the macro-economic challenges continued in the LatAm business (Q1: +7.5% vs Q4 15: +10.9%), largely due to the sequential growth slowdown in Brazil (Q1 16: 5.3% vs Q4 15: +5.4% and Q3 15: +5.7%); on the contrary, the Expense Management continued to post robust growth (+19.2% vs Q4: +18.8%, H1 15: 27.5%). The Embratec JV in Brazil (65%-owned by Edenred and 35%-owned by Embratec’s founding shareholders) is expected to be completed in the first-half of 2016. Management expects the organic IV growth at the lower end of the medium-term target of 8-14% in FY 16.
Edenred reported Q3 15 results in line with our expectations. Total revenue for 9M was up 6.8% on a lfl basis; however, on a reported basis, revenue was up 5.6% to €782m (post negative currency impact of -4.6% and +3.4% scope effect); this compares to our FY 15 estimate of €1,031m. On Issue Volume (IV), Edenred posted a growth of 8.7% in 9M and 7% in Q3 on a lfl basis (vs. our FY15 estimate of 8.1%), helped by better growth in Europe (3.7% in 9M and 4.1% in Q3). While rising unemployment levels in Brazil continued to impact the Employee Benefits business (+5.8% in 9M; +2% in Q3 vs. +8% in H1), overall IV in Brazil witnessed healthy growth of 9.7% in 9M (vs. +11.5% in H1) on the back of new client wins in the Expense Management business (+24.7% in 9M; +20.2% in Q3 vs. +27.5% in H1). On account of the sliding Brazilian real, management cut its operating profit target to €340-355m (vs. earlier guidance of €365-380m); this is in line with our estimate of €340m (as we incorporated currency woes in our 11 September update). Nonetheless, the company reiterated its guidance of 8-14% lfl growth in IV and its dividend policy of distributing >90% of recurring net profit after tax.
A good set of H1 numbers, particularly in the backdrop of a deteriorating economic scenario in Brazil which is a key market for Edenred (i.e. 50% of Issue Volume). - Brazil posted strong IV lfl growth (11.9%), despite some impact from rising unemployment on the Benefits business (IV lfl: 8%), primarily on the back of the robust pick-up in the Expense management business (IV lfl: 27.5%). The company continues to offset the macro blues through its digitalisation growth (now 66% at the group level) and its execution on the ground with a major partnership announced with Daimler. - Overall, IV growth was 9.5% and 9.6% on a lfl basis (vs. 1.5% and 12.3% in H1 14). While penetration growth and new solutions broadly held up (H1 15 vs H1 14: 4.6% vs 5.4% and 2.3% vs 2.5%, respectively), growth from voucher face value increases slumped to 2.5% (H1 14: 4.2%) as guided by the management earlier. Another key positive was EBIT growth of 11.5% to €165m despite a €6m FX impact, with lfl growth of 14.6% vs. 13.2% in H1 14; EBIT for the operating business increased 19.5% vs 17% in H1 14 on a lfl basis. This was primarily on the back of a 130bp improvement in the EBIT margin for LatAm to 43.8% (H1 14: 42.5%). Management confirmed its full-year guidance of 8-14% lfl growth in IV, revenue growth at a difference of 100bp to IV growth and set the EBIT target at €365-380m, incorporating a €23m FX impact given the FX rate of 3.47BRL/USD at the end of H1, i.e. 30 June 2015.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Edenred. We currently have 8 research reports from 1 professional analysts.
Hays plc (HAS.L, 182p/£2,639m) Q3 trading update to March 2018 (12.04.18) | Hydrogen Group plc (HYDG.L, 36.5p/£12.2m) Final results to 31 December 2018 (10.04.18) | PageGroup plc (PAGE.L, 537p/£1,755m) Q1 trading update to 31 March 2018 (11.04.18) | Parity Group plc (PTY.L, 11.1p/£11.3m) Final results to 31 December 2018 (10.04.18) | Robert Walters plc (RWA.L, 699p/£528m) Q1 trading update to 31 March 2018 (10.04.18)
Companies: HAS HYDG PAGE PTY RWA
Interims to February show operating profit up by 45% to £0.55m on 3.6% revenue growth to £8.6m. The results vindicate APC’s strategy of focusing upon driving high margin, design-in distribution sales as well as the benefits of a lower fixed cost base. APC acquired First Byte Micro in January which has provided a significant boost to its APC Locator’s business. The group continues to focus on its three-strand growth strategy. The shares have risen by 13% in the last three months. We retain our FY2018E PBT of £0.68m and 10p TP. Buy.
Companies: APC Technology Group
FY results are in line with expectations, showing a strong increase driven by acquisitions and 8% organic growth. Adjusted PBT is up 24% with EPS up 10%. Since the year-end, the group has continued its buy and build strategy with the acquisition of Beaumanor and Derek Lane, while the placing ensures balance sheet flexibility. The focus for the year is driving synergies. With a satisfactory Q1 trading update, we make no changes to our forecasts. The shares remain cheap in our view, trading at a substantial discount to its nearest comparator and at 43% to its peer group average. We recently increased our target price to 215p to reflect the Beaumanor acquisition. We are conservatively targeting a P/E in 2019 of 12.5x, providing strong upside from current levels.
Companies: Flowtech Fluidpower
We note today’s update on the distribution agreement (DA) termination notice and the final results. The two new pieces of news, in our view, are that the gross book value of the disputed stock was £4.3m at 31 March 2018 and that Sprue has entered into a £7m revolving credit facility with HSBC and drawn down £3m of this on 29 March 2018. Our forecasts, target price and recommendation will remain under review until the 2017 final results are reported for which, no date has yet been confirmed.
Companies: Sprue Aegis
FY2017 has been a period of excellent headway and Flowtech has entered FY2018 with confidence. As previously noted, management has successfully integrated six acquisitions over 2017, while operational improvements and a more favourable backdrop has driven a 24% increase in adjusted PBT to £8.7m (in line with ZC forecast). Revenue growth of 46% to £78.3m is split 8% organic and 38% through acquisition, with year-end net debt at £14.9m (FY2016 £13.1m). The platform for further progress is strong, underpinned by the acquisition of Balu in March 2018 for an EV of £10.2m, alongside the equity fundraise of £10.5m. The shorter-term focus is now on extracting efficiencies across the enlarged Group, particularly with regards to extracting procurement benefits. Nevertheless, there are significant opportunities for further consolidation beyond this, particularly in mainland Europe, where there is scope to leverage Flowtech’s existing brand relationships that in turn can drive long term earnings progression.
Companies: Flowtech Fluidpower
GYG has delivered a robust set of 2017 results, which are marginally ahead of our forecasts reset in November. Strong growth was delivered at all levels, and was primarily organic growth, with 14.7% revenue growth leading to 7.6% growth in adjusted EBITDA as it continues to invest in growth. We are maintaining our forecasts on the back of these results, and are comfortable with our assumptions given the strength of its order book, the growth dynamics of the market and its market leading position within this. We note the shares have been de-rated of late, and believe the FCF yield (>10% from 2018E), post-tax ROCE approaching 30%, dividend yield in excess of 6% and organic revenue growth (>10%) remains highly attractive.
With Q1 2018 behind us, we evaluate the performance of the tech sector versus the broader market, and peers across the pond to see how the London listed technology universe compares to its bigger and better known US counterparts. We examine if the UK listed tech sector is overvalued on a relative basis. No tech sector review can be complete without analysing the performance of the big eight mega tech companies who had a very good year and currently have an aggregate market capitalisation of US$4.79tn, roughly the size of the Japanese economy.
Companies: APC ECSC EUSP FDM GETB SPRP SNX
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
Companies: 7DIG ALT AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO ESG FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SSY SEE SIM SPE SRT STR TAP TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV
As indicated in recent trading statements (19th Dec and 8th Feb) FY17 results are in line with expectations. Revenue of £298.3m (FY16: £293.2m) is +1.7% YoY and 1.6% ahead of ZC. Gross margin declined 120bps to 30.4% due to cost input pressures resulting in adj. operating profit of £22.3m, a decline of c.13% YoY but in line with ZC estimate. Adj. PBT declined 14.5% to £21.1m resulting in adj. EPS of 12.3p, in line with ZC estimates. In the short term the industry outlook remains difficult and whilst today’s statement indicates trading in the early part of FY18 has been as expected, we trim profit expectations by c.4% to £18.2m (prev. £19.0m). A proposed final dividend of 4.6p takes the FY17 total to 6.7p, in line with ZC forecasts. The valuation of 7.5x FY18 earnings and 4.9x EV/EBITDA already appears to be discounting a great deal of negative news and even on the rebased dividend the shares yield a prospective 6.5%.
Companies: Epwin Group
Following the comprehensive trading update in early March today’s FY17 results hold few surprises. Revenue of £3.1m (FY16: £3.3m) is in line with forecasts that were revised at the time of the trading update and reflect the slower build out of revenue from key new customers. Gross profit of £2.0m (FY16: £2.1m) is also in line with forecasts that increased 7% in March due to a stronger than expected performance in margin. Last month’s placing to raise c.£300k underpinned the strength of the balance sheet that had £2.9m of net cash at the period end. Operationally, the business is moving in the right direction with annuity Transaction Services revenue increasing and the restructuring announced in March reducing the cost base. Forecasts continue to assume Mi-Pay will achieve profitability at the EBITDA level in FY18E.
Companies: Mi-Pay Group
The AGM trading update signals that it remains confident of achieving existing market expectations. Some customer programmes have recently seen lower than expected volumes, although new business continues to be won and management is confident it can bridge the gap. The growth story remains intact – sales growth has been robust; the scale of this growth has been a challenge but profit delivery is now in much sharper focus. The group intends to supplement the board and has already implemented operational changes that have already resulted in an improvement in gross margin. The shares now trade at a discount to its IPO price and we see strong value in the shares for their robust expected long-term sales growth and gross margin recovery.
Companies: Velocity Composites
Solid State’s trading update signals that the group has traded in line with market expectations in the year just ended, with better than expected growth in distribution and power. However, the outlook in Communications, its highest margin generating business, has seen order flow more difficult to achieve in America. We reduce our adj. PBT by £0.9m to £2.5m, with a 25% reduction in EPS to 25.1p. Our price target also reduces by a similar amount from 535p to 400p.
Companies: Solid State
The developer of advanced security and surveillance has today issued a strong AGM statement reporting that Q1 revenues were slightly ahead of management's expectations and almost 15% up on the same period in 2017. Order intake was boosted by £1.5m of radio communication contracts received from the MOD announced in February, although excluding those contracts, order intake was still higher than expected. The majority of the above MOD orders were scheduled for delivery in H1.
Companies: Petards Group
discoverIE has confirmed trading for the full year to March 2018 has been in line with management expectations reflecting strong growth in year-on-year profitability. This has been supported by sales growth of +15% and rising margins (both gross and operating). We make no changes to our forecasts or target price and reiterate our view that discoverIE is successfully targeting structural growth markets.
Companies: Discoverie Group
We have argued consistently over the last 12 months, as there is greater confidence in EUSP’s ability to become sustainably profitable, the share price should improve. This had been the case up to September 2017, since when the share price has fallen from 20p to 11.75p. With today’s news confirming EBIT profitability, we believe that there is a strong base to build on beyond 2017. At this stage, we have made no changes to our adj. PBT forecasts for 2018, 2019 and introduce forecasts for 2020. With potential upside to these forecasts we are happy to maintain our DCF-derived target price of 25p and our Buy rating. We view the current share price as an excellent buying opportunity. REA